Sunday, April 24, 2011

Internet Meme of the Day: Algorithmic Pricing

An amusing episode from Michael Eisen: Amazon’s $23,698,655.93 book about flies [via James Fallows, Chris Blattman, and many others):

A few weeks ago a postdoc in my lab logged on to Amazon to buy the lab an extra copy of Peter Lawrence’s The Making of a Fly ... The book, published in 1992, is out of print. But Amazon listed 17 copies for sale: 15 used from $35.54, and 2 new from $1,730,045.91 (+$3.99 shipping).

More precisely, the two new books were on offer for $1,730,045.91 and $2,198,177.95. When he checked the next day, Eisen found that the prices had increased further. Intrigued, he kept checking everyday, and found that the two sellers kept hiking the price on a daily basis, until it went all the way up to over 23 million dollars!

As I amusedly watched the price rise every day, I learned that Amazon retailers are increasingly using algorithmic pricing (something Amazon itself does on a large scale), with a number of companies offering pricing algorithms/services to retailers. Both profnath and bordeebook were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced. But the two retailers were clearly employing different strategies.


  1. Dheeraj Sanghi said...

    Fantastic story. Thanks for the link.

  2. Giri@iisc said...

    Amazon can consider waiving the shipping fees for books that cost over a million dollars !

  3. Dilip D'Souza said...

    Just a treat.

    One of the sellers for that book on flies was a "profnath" -- which sounds suspiciously Indian -- and he's no longer in the race on the Amazon page. That's left bordeebook to sell the thing at about $1000 now, still a ridiculous price, if not quite in the $23M league of ridiculosity.

  4. Vijay said...

    I have a copy or maybe two of the book! Will gladly sell it for $23m and could persuade our library to do so too. The author is mulling over writing a new edition and this may persuade him to wait a bit. Does he get royalties as a fraction of Amazon's selling price?